Accrued wages journal entry

Overview

In accounting, accrued wages are the wages that the employees have earned but have not received the payment yet. In this case, the company needs to make the journal entry for accrued wages at the period end adjusting entry.

Usually, when the company makes the payments for wages, it makes the journal entry by debiting the wage expense and crediting the cash. This is the case where there is no accrued wages journal entry required.

However, sometimes, the company may have the policy to only make the payment of the wages for the employee that have worked for a certain period of time (e.g. one week). And wages of the employees that have worked less than a certain period of time (e.g. new employee) will be accrued for the next payment period.

This is this case where the accrued wages journal entry will be required. And if such journal entry is not made, both total liabilities on the balance sheet and total expenses on the income statement will be understated.

Accrued wages journal entry

The company can make the accrued wages journal entry by debiting the wages expense account and crediting the wages payable account at the period-end adjusting entry.

Account	Debit	Credit
Wages expense	$$$
Wages payable		$$$

When the company makes the payment for the wages that it owes to employees, it can make the journal entry by debiting the wages payable account and crediting the cash account.

Account	Debit	Credit
Wages payable	$$$
Cash		$$$

Accrued wages example

For example, the company ABC has the policy to make payments every two weeks of the work done to employees that have worked for more than one week. The wages of new employees who have started working and have worked less than one week will be accrued for the next payment period.

On January 31, 2021, there are five new employees that have just started working for three days. Hence, they do not receive the payment of the wages on January 31, 2021, yet and their total wages earned which is $3,000 will be accrued for the next payment period on February 15, 2021.

In this case, in the January 31 adjusting entry, the company needs to make the journal entry for accrued wages of $3,000 as below:

Account	Debit	Credit
Wages expense	3,000
Wages payable		3,000

Afterward, when the company ABC makes the payment for the above wages payable of $3,000 on February 15, 2021, it can make the journal entry as below:

Account	Debit	Credit
Wages payable	3,000
Cash		3,000

This journal entry is made to eliminate the wages payable of $3,000 that company ABC has recorded in the January 31 adjusting entry.